Tesco is facing Britain's largest ever equal pay claim and a possible compensation bill of up to 4 billion pounds (C$7 billion), according to a law firm which has begun legal proceedings. It comes as a campaign for equal pay grows in the U.K.

Has the shine come off HR outsourcing?

We're writing less stories about outsourcing these days, and more about the huge benefits of getting human resources right

Jan 29, 2013

By Todd Humber

Over the years, Canadian HR Reporter has tackled the issue of HR outsourcing from many different angles.

On June 4, 2001, we ran an article outlining CIBC’s move to outsource nearly all of its HR operations to EDS in a $227-million deal, resulting in the transfer of 200 CIBC HR personnel to EDS.

On June 2, 2003, we detailed BMO’s signing of a 10-year, $750-million deal with Exult to outsource most of its transactional HR work. We also told the stories of companies such as Rogers, Air Canada, Home Depot and Starbucks that went down similar roads.

There was so much outsourcing of HR that we even dedicated some space to discussions around what skills HR professionals would need in order to land a job with an outsourcing firm, because that was starting to look like the only viable career path for many professionals — especially entry-level ones.

But then cracks and dissent started to show in the outsourcing wall. RBC, which at one point outsourced recruitment, brought it back in-house. In the early 2000s, RBC was hiring about 20,000 people per year — but about 60 per cent of those hires were internal and it found the outsourcing firm couldn’t properly evaluate employees already on the payroll.

Other concerns began to arise, such as privacy. In 2004, British Columbia introduced legislation to prevent personal data from landing in the hands of foreign governments. It made the move after the B.C. Government and Service Employees’ Union (BCGEU) raised concerns about the outsourcing of the Medical Services Plan to a company in the United States, governed by the USA Patriot Act.

Ontario’s eHealth debacle also gave outsiders a black eye. In 2009, the province’s program to move health records online had 30 full-time employees and 300 consultants on the payroll. It wasn’t exactly a textbook lesson on the benefits of outsourcing work. (Though it’s a great business case for the benefits of full-time staff.)

The HR outsourcing train seems to have lost plenty of steam over the last decade.

Yes, firms are still outsourcing HR work. Less than two years ago, Air Canada inked an eight-year, $80-million deal to outsource its HR contact centre, employee data management, employee travel support, recruiting services, benefits administration, leave management and payroll to IBM, which does similar work for American Airlines.

But the tone of the conversation around outsourcing seems to have shifted.

As I write this, I’m back in the office for the first time in nearly a week. I had the opportunity to attend the Human Resources Professionals Association (HRPA) annual conference in Toronto.

I enjoy conferences for a number of reasons but first and foremost is the chance to talk to professionals who I wouldn’t ordinarily have the opportunity to meet — the ones who are on the front lines of their organizations every day.

One conversation I had focused on outsourcing. I asked this woman, a mid-level professional at a financial institution, what part of HR she would consider outsourcing. I wasn’t taking notes during our conversation but, to paraphrase her, she said: "None of it."

Not payroll, not benefits administration, not HR call centres? The answer came back, adamantly and repeatedly: "No."

The gist of her argument was HR is simply too important to shovel off to outsiders. HR departments need to be robust, not skeleton-staffed, for various reasons — prime among them is building knowledge of the business and grooming the next generation of HR leadership.

It’s an interesting point. It would be naive — and wrong, at least from these quarters — to say HR should be completely untouchable from an outsourcing standpoint. There are plenty of tasks that can often be done better and cheaper by external experts.

But we’re writing less frequently in Canadian HR Reporter about outsourcing deals and more about the importance — and huge benefits — of getting HR right.

For both employers and HR professionals, this can only be seen as good news.

Recent Columns by Todd Humber ▶

Todd Humber is the publisher and editor-in-chief of Canadian HR Reporter, the national journal of human resource management. Follow him on Twitter @ToddHumber

Share

CLICK TO COMMENT ON THIS BLOG POST

Headline for your comment (Optional)

Name (Required)Anonymous

Email Address (Required, will not be published)

Comment (Required)

All comments are moderated and usually appear within 24 hours of posting. Email address will not be published.

3 Comments

hr outsource

Tuesday, May 7, 2013 12:46:00 AM

It's the vital part of any sources to improve or flow of your workplace their i knew some different work which is hold by also PEO as we know the whatever the work-done by HR department so i have one question here PEO has different rule from our HR department who is take report as your benefits and details of employee's money?hr outsource

It's not a competition...you can have both

Thursday, January 31, 2013 11:05:00 AM by Tim Baker, CHRP

Interesting article...the second one on outsourcing HR I've read in the last 2 weeks.

Let's take a moment and remember that seeking an outsourcing solution for your HR needs doesn't need to be an all-or-nothing scenario. Outsourcing HR components or projects can be a strategic move. The key is to stop thinking it as (to quote the other comment) a "service agreement". You need to find a "strategic adviser" or better yet a "trusted partner". And I disagree with the comment that said you can't find "passion" from a trusted partner when outsourcing for your HR needs.

I agree that it is in the best interest of the organization to have a robust HR team inside, but let's not think of "outsourcing" in too narrow of a view. There are many firms that the outsourcing scenario has the partner working inside the "walls" of the organization.

Besides...I'm sure we can all agree that sometimes aligning with an outsourced partner can allow the internal HR team to focus on continuing strategic alignment with the organizational goals.

Outsourced staff will never beat inhouse people on most fronts

Wednesday, January 30, 2013 8:51:00 PM

Thinking of outsourcing HR reminds me of the notion that "if you want a job done properly, do it yourself." You want staff to go the extra mile? Well, don't expect you can get that passion and commitment from someone outside the business. You can't put passion for work into a service level agreement with your outsourcer.